Has the nation reached full employment?
Bureau of Labor Statistics reports 10-year low in unemployment rate.
You may have heard the “good” news: Unemployment rates have been on the decline in the United States these past few years. In fact, the seasonal adjusted unemployment rates reported by the Bureau of Labor Statistics was 5 percent in October 2015, the same as it was in October 2005. Have we reached full employment? What does this actually mean?
Among policymakers and economists, there is much debate as to what rate of unemployment would be considered full employment; it ranges anywhere from 3-6 percent. Full employment is achieved when all persons who want and are able to work have found employment. Understand, however, this does not mean the unemployment rate is zero. People may just be entering the workforce, changing jobs, changing careers or moving to new locations to find work.
Unemployment data is watched closely by policymakers and widely reported in the news because they provide insight into how well our economy is doing. During times of recession, normally unemployment rates go up and during boom times they are generally low. With the unemployment rate at 5 percent, concerns about inflation start to rise. With more people holding jobs, there is more disposable income, which leads to more spending and more demand for products and service, thus driving prices up. In addition, if everyone who wants a job has one, the cost of labor would go up because it would cost more to keep and attract workers. Higher wages would than increase production and service costs, again causing prices to go up.
Researching and analyzing employment trends and labor market information is not only helpful for policymakers. This information is available to the public and can be useful in deciding what job to pursue, what skills are needed, where to live and what wages to negotiate.